I use win per day per gaming position (WPD) as a proxy for same store gaming sales as shown on a trailing twelve month basis in the chart. We’ve now had 12 straight months of declines in WPD and 19 out of the last 20. Ouch. As bad as that looks, it was even uglier in 1. WPD declined 13 straight months, averaging 17% down per month. Now that was pain.
Regional gaming stocks got crushed beginning in mid-1996. It’s probably no coincidence that my first day covering the gaming sector was also in mid-1996. Maybe that’s why I’ve always been good on the short side. But stocks rebounded strongly beginning in late 1998 and lasting a decade, interrupted only by 9/11.
So why shouldn’t we be loading up on regional gamers? Valuations are 5-6x, in-line with those prevailing in the mid to late 1990s and WPD trends are similar if not better. Let’s go to the video tape, actually the chart, to answer this question. The difference between now and then is that while WPD declined in 1, total revenues increased dramatically. Markets were still growing. The pie was getting bigger. New casinos were just cutting the slices smaller, temporarily. Fast forward to present time and we see that the markets are contracting along with WPD. Gaming is cyclical after all.